You can’t get rich with credit card debt and you need a plan to pay off your mortgage.

Remember Albert Einstein: “Compound interest is the eighth wonder of the world. He who understands it, earns it, he who doesn’t pays it.”

Debt is compounding interest in reverse, and it will do you more harm than good if you don’t understand it and take control of it.

You don’t want to be the mug paying ridiculous amounts of interest to the banks, all that does is make the banks and their shareholders richer.

And credit card debt is never a good look. It is hard evidence that you do not understand money and you are not in control of your spending. It’s proof you are living beyond your means.

If you have to use credit to buy something, then you can’t afford it. And it’s never a bargain if you can’t afford it.

The important thing to remember about debt is:It exists and won’t go away until you work out a way of paying it back.

You have to deal with debt. Not just accumulate it and pretend it doesn’t exist, which seems to be a rather over used strategy these days. It’s great to buy property, if that’s what you want, but you need to have a debt reduction strategy in place, working alongside your wealth accumulation strategy. Debt reduction is the key to wealth creation.

You need to get rid of all credit card debt, and you need a well-structured mortgage, one that helps you pay down your debt as fast as possible. Forget about interest rates for a minute, that’s the bank’s way of marketing to get you taking out longer term loans that will cost you more in the long run. I’ll explain all of that when we catch up.

It’s important to make sure you are taking on a level of debt that is realistic. You need to work out, mathematically and emotionally if you are comfortably able to afford the debt, the term of the loan, the repayments, and you also need to think about the effect that having debt will have on your current activities and future goals.

Will you be able to meet both your repayments, as well as maintain the lifestyle you are used to?

It can be very tempting to go for that ‘slightly more expensive’ property, especially if your bank is willing to increase your loan. Banks make money from lending money. They are not thinking about your wellbeing, they are thinking about their profit and their shareholders. Be very careful.

Consider these questions:

Does owning your own home, with the commitment of a mortgage, fit with your future lifestyle goals?

Have you considered the possibility of future rate rises and would you be able to meet higher repayments?

Are your circumstances going to change dramatically in the short and medium term? For example, are you planning on starting a family and potentially dropping to one income?

Are you 100% comfortable with the percentage of your income that is going towards debt repayments and will you be able to maintain this in the long term?

If you are buying a property, do you have a 20% deposit? If not, do you understand the associated risks of this strategy? Do you know what Loan Mortgage Insurance is, who it protects, and how much it costs?

It can be overwhelming to consider all of these issues, especially when friends and family are all offering their experience and advice.

Everyone’s situation is different, so speak to me and I will work through everything with you.

I will help you feel comfortable with your decisions and feel confident that your debt levels are consistent with your overall wealth management strategy.

Nicole Heales is a Credit Representative No 408933 of Crown Lending Pty Ltd Australian Credit Licence No 388279.